Bank-Specific and Industry-Characteristic Determinants of Commercial Bank Profitability: Empirical Study for Indonesia

Abdul Pulungan () and Ahmad Erani Yustika ()
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Ahmad Erani Yustika: Supervisory Board of Bank Indonesia

No 702522, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: This study discusses the influence of a series of bank-specific factors such as CAR (Capital Adequacy Ratio), OEOI (Operations Expences to Operations Income), NPL (Non Performing Loan), and FBI (Fee-based Income) on ROA as a profitability proxy. Also studied whether commercial banks probability affected by the concentration (Structure Conduct Performance, SCP) or efficiency (Efficiency Hypothesis, HE). Share of Third Party Funds (STPF) is variable proxy of SCP, while the OEOI proxy of HE. By using panel data procedures of the 111 commercial banks during 2005 to 2011, this research concludes that CAR and FBI have significant effect with positive sign on ROA, while OEIO and NPL significant with negative sign. STPF does not significantly affect on ROA so SCP theory as a proxy for the concentration is rejected, on the other hand, this research accepts the HE theory that focuses on the efficiency.

Keywords: profitability; structure conduct performance; efficiency hypothesis (search for similar items in EconPapers)
JEL-codes: E50 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2014-10
New Economics Papers: this item is included in nep-ban, nep-eff, nep-mac and nep-sea
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Published in Proceedings of the Proceedings of the 12th International Academic Conference, Prague, Oct 2014, pages 962-971

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:0702522

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